This was almost comical. I had not been paying attention to my TD Ameritrade (AMTD) Account with respect to margin requirements because I wasn’t expecting it to come into play yet, but also because I knew liquidating wouldn’t be a problem if/when that day came. I opened the account today to get to their Trade Architect platform which lets me watch and listen to CNBC during the day at my computer. The rest of the platform isn’t of much use for me since I really prefer Interactive Brokers’ (IKBR) system more and do my trading there.
Anyway, as I opened my account on the way to Trade Architect I saw this alert:
Call Alert — Immediate Action Required.
* Maint. call $1,706.06
* Current Value -$1,692.88
A maintenance call is issued when your account value drops below our maintenance requirements due to changes in the market value of a security or when you exceed your buying power. Maintenance calls may be met by depositing funds, selling stock, or depositing securities. TD Ameritrade may forcibly liquidate all or part of your account without prior notice, regardless of your intent to satisfy a margin call, in order to protect your interests or ours.
The timing was perfect as it hit on the morning of the latest rally to start. For a few minutes I debated letting the day play out with the expectation the market would grow out of it today, but didn’t want to take the risk of AMTD forcing a closing of any of my options tomorrow. I have the following option positions in this account with the amount in-the-money (ITM) or out-of-the-money (OTM) following each one based on the prices as I wrote this.
- -2 SSO Jan 21 2012 40.0 Put, $0.50 ITM after selling for $3.90 and current trading higher
- -1 UCO Jan 21 2012 35.0 Put, $4.37 ITM after selling for $3.50 and current trading higher
- -4 UWM Jan 21 2012 30.0 Put, $0.93 OTM after selling for $3.45 and current trading higher
The long positions I had to start the day were 75 shares of BND (Intermediate-Term Bond ETF) and 460 shares of SHM (Short-Term Municipal Bond ETF). The yield on the SHM is only 1.47% so I chose to sell these shares instead of the BND based on the belief that share prices can’t climb much more and the yield isn’t worth clinging to. I sold 460 SHM shares for $24.22 and received $11,140.97 after sales fees. Luckily this is one of the ETFs AMTD lets investors buy and sell commission free if you hold the shares for at least 90 days. I’ve held these shares for over a year, so I easily met that mark. I ended up dumping these shares in two lots since my first sale of 200 shares didn’t do enough to cover my margin call. Without regular commissions this trade only cost me $0.23 in “sales fees”.
Coming into today I was considering buying a few ultra short funds to cover my long ultra index funds rather than taking the losses yet. I might get another chance to make that trade today depending on what the Fed says at 2:15. Tomorrow could be a very different day too. I’m at the ready and just waiting for a solid reason to add the short ETFs this late in the decline.
That was one hell of a day. DSX is looking bad – no worse than any of the other shippers but it’s looking like it’s going to take the industry longer than expected to make a comeback. I do still think we’re in the best of the sector though. I also don’t have a clue what to make of oil these days. The only play I have at the moment is a short Jan ’12 BP 45 Put and long Jan ’13 BP 50 Call – for which I took in a credit of $0.50. It’s losing now but could still turn out nicely.
Although most of my positions are losing now (apart from the short UNG Calls and AEM Put), I’m just glad that I got out of MDR and ENTR last month.
One I’m taking a good look at now is CSCO. It’s got too much cash on it’s balance sheet to be trading at these levels. I’m also taking a close look at FDX – which is one of many stocks that hit their 52-week lows today).
This is unrelated to your post today but was just wondering; I was reading some of your older posts about selling calls on the VXX. In the current market are you thinking about pulling a similar play? I haven’t seen any posts about it from you recently so thought I’d ask, as I am considering that option.
@ Ronan, how many DSX shares do you have now? I only have 300, so I can’t lose a ton. I’m glad I didn’t double up after being assigned. I’ll stick with it and wait for the turn around and sell OTM calls to bring in a few cents.
On oil, I’m only looking at UCO. I thought about selling 25 strike puts today after the bullish inventory report, but didn’t get to it. Maybe tomorrow.
CSCO, AAPL, GOOG and a bunch of others are starting to look very tempting. With so much cash and huge revenue they are going to get better before long I think. Retail numbers come out soon, could be a big opportunity to turn the markets if consumers haven’t gone dormant.
@Anon, I’ve been thinking about VXX a lot lately. I’m watching some vertical spreads to get in that way maybe. I doubt I’ll make any trade until I think the market is turning higher. Once it turns, VXX will plummet. I won’t play it bullish again, but will probably try on the bearish side by selling a naked call or buying a put. Depending how strong my convictions are, I’d like to do the former.
Right, that’s exactly what I was thinking; selling a call is the far superior option as it turns the implied vol pricing to your favor. I wish today had ended bullish like yesterday; if I make a move on this I think it would be a Dec. expiry to give the VXX plenty of time to die down.
My exposure to DSX is the same as you – 300 shares. It was 600 but I halved this about a month ago at a loss (near the $10 level). I’m considering selling 3 more Naked Puts to bring it back up to the 600 shares. Will see what the next couple of sessions bring.
Any thoughts on another old position of yours that’s been coming into my radar lately – BA?
I can see some good near-term catalysts for them in the form of new aircrafts (the delays can only go on so long) and new orders (the airlines fleets are ageing at this point and they can only avoid their replacement for so long).
BA has hit yet another 52-week low today.
@ Anon, I’m still debating when to sell a VXX naked call or two. I might make a trade on Monday if we have a third positive day in a row, assuming today doesn’t roll over. I might go out as far as the 40 strike too, although I’m actually tempted to go in the money with the belief that the worst might be over. Selling a Dec $30 call gives you protection all the way up to $37.40. The highest we’ve been lately is barely over $36 and we dropped quickly after that. See, I’m already talking myself into it. Maybe I’ll enter a limit order in case we get a spike higher.
@ Ronan, I’m not going to add any more DSX, but am happy to see it off its lows. I might change my mind, but will probably just let this position play itself out without adding more exposure.
BA is getting very tempting again. I own 100 shares in my IRA, so I have some exposure still. I’ll stay long in my IRA and might sell an OTM put on it next week if I think we’ve bottomed by then. My only fear is that Europe slows down enough to affect them. So far it appears the worries are overdone which makes BA a good pick right now.
@ Anon, I forgot to mention – I agree that December could be good for the basic flaw in VXX that it will usually trend lower in most market conditions over multiple months. I just entered (on 8/12 @ 12:45pm) a limit order to sell a Dec $33 call for $7.00 good through Monday. If we get a dip any time before COB Monday I’ll be short one call.